Regulators put the brakes on companies seeking to abandon Nevada Power service

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Dive Brief:

State regulators last week rejected a request from a data storage company to leave Nevada Power's service, likely putting the brakes on several other companies' similar bids in an effort to protect remaining utility customers from bearing the costs.

Regulatory staff recommended the company, called Switch, be allowed to change — after paying an exit fee in excess of $27 million — but two of the commission's three regulators said they were unsure the amount was appropriate.

Four casinos have similar applications pending, and according to the Las Vegas Review-Journal they consume almost 400 MW of power during the year's peak demand periods. The utilities, like Switch, wanted to buy cheaper power on the wholesale markets, and executives criticized what they call exorbitant utility profits.

Dive Insight:

The Nevada Public Utilities Commission has slowed the potential exit of several companies from Nevada Power's service, a shift that had many worried about the rate impacts on remaining customers. Regulators voted 2-1 to deny an application submitted by Switch, a technology company developing data centers.

And as the Las Vegas Review-Journal points out, the decision likely impacts similar pending applications by Wynn Las Vegas, MGM Resorts International, Caesars and the Las Vegas Sands Corp. Those companies consume 370 MW of power during peak periods, leading to debate over how the utility would make up the lost revenue, and whether it would charge other ratepayers more.

Regulators said Switch could reapply, which would allow for a fuller examination of the issue. The company had tapped Constellation to supply its energy needs, with an hourly data center load up to 35 MW.

Regulators said "significant investment on Nevada Power's system since 2001 has complicated, not simplified, the necessary analysis and evidence required for the commission to determine whether or not an exit application will be contrary to the public interest."

If Switch reapplies, the commission said the company should be ready to "fully address how the long term obligations discussed in this order may be properly captured."

Casino executives actively lobbied regulators to approve Switch's request. Matt Maddox, president of Wynn Resorts, criticized Nevada Power for sending back huge profits back to its parent company Berkshire Hathaway and not returning cost savings to its big customers.

The utility increased operating profits 27.7% from 2013 to 2014 and yet there have been no rate reductions for customers, he said, according to the Review-Journal.